He said that the limited supply of ethanol had resulted in the pervasively high prices. Ever since the government started pushing the use of gasohol as a replacement for petrol, the price of ethanol has risen from Bt12.75 a litre to Bt25.30 and is likely to rise further. Ethanol is blended with petrol at a ratio of 10 per cent to make gasohol.

"The ethanol trade will be back to a free market system in the next two to three years when there are more ethanol plants in operation. The committee that promotes alternative energy and bio-mass is encouraging the entry of these newcomers," he said. There are currently only two plants in operation.

However, if the three ethanol plants which are being planned now are not finished by 2007, the ethanol price will continue to increase. But if these plants come on line this year, the price of ethanol should not rise much from the present Bt25.30 a litre.

Metta added that ethanol plants that used tapioca as a raw material were cheaper to operate than those that used sugar.

The Bt25.30-a-litre price of ethanol is considered too expensive because the price of cassava root now stands at a mere Bt1.50 per kilogram. An ethanol plant should make sufficient profit with an ethanol price of Bt21 to Bt22 a litre, he said.

Metta added that the climbing ethanol price had pushed the gasohol price to a level close to that of 95-octane petrol. However, he said that the promoting gasohol use would still benefit the country because it would reverse the foreign deficit from imported gasoline.

But, the country has been forced to import ethanol to make up for a lack of domestic supplies.

To keep petrol prices down, the government will continue collecting less than it did in the past from each litre of petrol to pare down the debt the Oil Fund racked when the government was subsidising petrol and diesel at the pumps, he said. This will continue despite the risk of adverse effects on the fund.

He added that his office planned to reduce the amount of gasohol sales diverted to pay down the Oil Fund debt to Bt0.31 per litre from Bt0.54 per litre to reduce the burden on oil traders.

Metta predicted that although the government wanted to eliminate 95-octate petrol from the market, this would take a couple of years until there is sufficient production of gasohol.

 Chaiwat Churit, senior executive vice president of PTT Plc's oil business group, said that oil traders were not certain that they would be able to withdraw 95-octane petrol from the market by the end of this year because ethanol supply is not stable.

He said that even though the ethanol price had risen to Bt25.30 a litre, oil traders were under orders to maintain the price differential between gasohol and 95-octane petrol at Bt1.50 a litre, which has added to their losses.

"The Energy Ministry should urgently look into matter, otherwise, this may cause problems in the long term," Chaiwat said.

Watcharapong Thongrung

The Nation